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Thursday, 24 June 1999
Page: 7369

Mr WILLIAMS (Attorney-General) (9:47 AM) —I move:

That the bill be now read a second time.

The Customs Tariff Amendment Bill (No. 2) 1999, which is now before the House, contains a number of amendments to the Customs Tariff Act 1995. Most of the amendments have been previously tabled in this House as customs tariff proposals. Accordingly, I will only outline the major amendments here.

Schedule 3 of this bill is operative from 1 July 1998. These amendments to the customs tariff remove the customs duty from inputs to the manufacture of information industries equipment, implementing the commitment the government made in its `Investing for Growth' industry statement of December 1997.

Most fully assembled information industries equipment is imported duty free. However, many inputs used in local production of the same equipment attract either the five per cent general manufacturing tariff rate or a three per cent tariff rate under a tariff concession order.

Following consultation with industry, the government has taken action to address this problem on two fronts. The first and central element of the government's approach is an acceleration of duty reductions already scheduled under the information technology agreement. With the exception of a small range of finished goods, the government has brought forward by 18 months the tariff reductions to which Australia is committed under that agreement. Accordingly, a free rate of duty has operated since 1 July 1998.

The second element of the approach has been the creation of a new schedule 4 item in the customs tariff for those inputs not covered by the information technology agreement. This allows duty-free entry for other inputs that are currently the subject of a tariff concession order.

The new item, No. 65, covers inputs to the manufacture of information industries equipment. This equipment is defined in terms of a series of tariff subheadings listed in by-laws written to the new item.

Under these changes, Australian information technology manufacturers will benefit from duty-free access to key inputs which will strengthen their competitive position. The cost to government is estimated at $80 million over the 18 months to the year 2000 and this should translate into reduced costs for industry and lower prices for consumers.

Schedule 4 of this bill is operative on and from 1 September 1998. The former Minister for Industry, Science and Tourism, the Hon. John Moore, announced on 24 July 1998 the government's decisions on tariffs and other matters relating to the Industry Commission's inquiry into the medical and scientific equipment industries.

The government accepted the general thrust of the commission's recommendations and addressed these recommendations both in its decisions on tariffs and other recent initiatives, particularly those announced in the `Investing for Growth' industry statement. The government's decision in relation to tariffs was to remove customs duty for goods under tariff headings 9013 to 9033, inclusive, with the exception of goods which are included in the passenger motor vehicle manufacturing plan, such as speed indicators and revolution counters.

In respect of tariffs, the Industry Commission noted that around 85 per cent of medical and scientific equipment was entered under headings 9013 to 9033 of the customs tariff. About 75 per cent of medical and scientific equipment entering Australia attracts a free rate of duty. The remaining goods are subject to a nominal tariff of five per cent. However, most of these goods enter the country using the tariff concession system at a rate of duty of three per cent. As these goods do not compete with locally manufactured goods, there is little justification to retain these nominal tariffs.

Schedule 6 of this bill implements the government's decisions in relation to customs tariff rates of duty and by-law arrangements following the Industry Commission's inquiry into machine tools and robots. These changes have operated from 1 April 1999.

The first of the changes involves the reduction of import duty to free for parts of machine tools classified to heading 8466 of the customs tariff. These subheadings cover parts for machine tools for working metals which were dutiable at five per cent. This action will overcome the present anomaly where, in some instances, the importation of the complete machines incorporating these parts does not incur import duty.

It is the government's policy to reduce the impact of tariffs on inputs to industry. The Australian machine tools industry exports in excess of 90 per cent of its production, and much of that production incorporates goods imported as parts on which customs duty was paid. The removal of the customs duty on parts for machine tools and robots is expected to make the Australian produced goods more internationally competitive. Based on current data and predicted trade, the anticipated cost to the government in forgone revenue as a result of the removal of this duty is estimated to be between $5 million and $5.6 million per annum.

The government has also decided to delete items 48, 49 and 55 of schedule 4 to the Customs Tariff Act 1995. These items provide a free rate of duty on goods which satisfy certain criteria, principally that there would be no substitutable goods made in Australia.

Item 48 covers parts and accessories for machine tools for the working of metals. As the duty on these parts and accessories is being reduced to free in this schedule, the duty-free concession accorded by item 48 is no longer required and is being repealed. The impact on industry is expected to be negligible because of the offsetting arrangements of tariff reductions.

Item 49 provides a concession to importers for certain parts for machines which incorporate a computer controller, for example, electric lasers and electromagnetic soldering machines. Trade statistics reveal that this item has had little use and its cancellation will have little impact on industry.

Item 55 was created in 1992 to provide an import duty concession for machine tools and parts thereof for the working of advanced materials such as carbon fibres and exotic metals. Trade figures indicate that this particular item has not been used by industry in the past five years or so. The cost to industry through its revocation is expected to be minimal.

The amendments contained in the other schedules of this bill are of an administrative or technical nature. They have no affect on rates of customs duty and have no revenue implications.

I commend the bill to the House. I present the explanatory memorandum to the bill.

Debate (on motion by Ms Macklin) adjourned.